Ashikaga Bank, now under temporary state control, said Friday it will eliminate 15 percent of its workforce by the end of fiscal 2006 as part of its new business improvement program.
The restructuring plan will reduce the size of the workforce to 2,200 from 2,600 at the troubled bank, which was nationalized Dec. 1 through the government’s seizure of all outstanding shares for zero yen.
The regional bank, based in Utsunomiya, Tochigi Prefecture, announced the business improvement plan as well as its financial results for the year to March 31.
In an earnings report for all of fiscal 2003, the bank said it racked up a 782.8 billion yen net loss due to a surge in its loan-loss charges for loans to troubled corporate borrowers.
As a result of the massive loss, the bank incurred a negative net worth of 679 billion yen at the end of March, compared with 102.3 billion yen as of Sept. 30.
The government hopes to find a buyer for the bank in two to three years after boosting its profitability so that it can reduce the negative net worth, sources said earlier.
The smaller the negative net worth at a nationalized bank, the lower the amount of public funds that the government will have to inject into its capital base when handing over its management to its buyer.
Ashikaga Bank President Norito Ikeda told a news conference he hopes to minimize the expected financial burden on the public.
“We are aware that the (rehabilitation) plan is hard” to achieve, Ikeda said. “As a bank placed under temporary state control, however, we will do our utmost to reduce” the negative net worth.
Ikeda said it is not yet time to think about searching for a buyer.
“There will be various offers only if we fulfill our (restructuring) plan,” he said.
After the bank’s announcement, Financial Services Minister Heizo Takenaka separately told reporters, “Now that Ashikaga has announced its earnings results and business plan, the bank is set for revival.”
Takenaka said he hopes that Ikeda will take the initiative to also revive the regional economy.
“If the bank reforms its operations, supports companies that should revive, and improves its financial health, that would increase Ashikaga’s corporate value and thus contribute to the regional economy,” he said.